Applied Materials falls on dim solar wafer prospects

Reuters News
Posted: Aug 25, 2011 11:13 AM

(Reuters) - Shares of Applied Materials fell 4 percent on Thursday as the company's weak outlook underlined a slowdown in the broader semiconductor equipment market and prompted a slew of brokerages cut their price target on the stock.

On Wednesday, the world's largest chip-fab equipment maker projected fourth-quarter revenue to fall by as much as 30 percent, hurt by plummeting solar-cell demand, overcapacity at foundries and falling prices.

Orders in Applied's environmental solutions segment, which includes equipment used to fabricate solar cells, nearly halved.

RBC Capital markets analyst Mahesh Sanganeria said Wednesday's weak outlook was consistent with a slowdown in semiconductor equipment sales as foundry customers hold back on expansion plans.

Chip-equipment makers have been experiencing slowing demand as semiconductor makers cut down on orders on bleak sales outlook for PC and industrial equipment.

Analysts expect the company's foundry customers, including contract chip manufacturer Taiwan Semiconductor Manufacturing Co Ltd, to go slow on or entirely hold capacity expansion, anticipating a decline in orders.

"Applied also implied orders likely will not pickup before the January quarter, closer to our expectations for a pick-up in the June quarter at the earliest," said Sanganeria, who cut his target price on the stock to $11 from $12.

Average worldwide bookings for semiconductor equipment declined 16 percent -- the largest in over a year -- in July, according to Semiconductor Equipment and Materials International.

Earlier this month, Tokyo Electron, the world's No.2 supplier of chipmaking equipment, slashed its annual forecast by half, saying that investment by makers of chips used in PCs, smartphones and tablets had stalled.

Shares of Applied Material, which competes with KLA-Tencor, Lam Reasearch and Novellus, were trading down more than 4 percent at $10.89 Thursday on Nasdaq.

Brokerage Old PT New PT

RBC Capital Market $12 $11

Susquehanna $12 $11

Barclays $16 $15

S&P Equity $16 $14

Stifel Nicolaus $15 $14

(Reporting by Himank Sharma in Bangalore; Editing by Saumyadeb Chakrabarty)